Wholesale Costs Drop 0.6 per cent

ByJames L. Rowe Jr.

July 9, 1977

The nation received some mixed economic news yesterday: wholesale prices declined dramatically in June while the unemployment rate edged up from 6.9 per cent to 7.1 per cent, the Labor Department reproted.

Much of the 0.6 per cent decline in wholesale costs was due to a bigh 6.3 per cent fall in farm prices. THe lower farm prices should show up on supermarket shelves soon. Industrial prices rose 0.3 per cent in June.

The drop in th wholesale price index confirms Carter administration predictions that the spurt of inflation in the fist few months of the year would be short-lived.

While the unemployment rate rose slightly, the number of AMericans [WORD ILLEGIBLE] "continued to expand market [WORDS ILLEGIBLE] Department said. More than 270,000 people found work in June.

Only an "exceptionally large" jump in the number of people starting to look for work - the labor force increased by 473,000 people last month - puched the unemployment rate up, according to Julius Shiskin, commissioner of labor statisties.

Most of hte increased unemployment was concentrated among womer. "with some rise for teengaers." Shiskin testified befor the Joint Economic Committee. The rate for audlt men fell.

There were 6.96 sudden rise in unemployment after months of steady improvement since the rate hit 8 per cent in November does not portend a worsening of the jobless picture in coming months.

While the unemployment report was ambiguous, the wholesale price decline was clearly good news.

White House deputy press secretary Rex Granum said the June price decline "is heartening. Price increas during the second half of the year are likely to be more moderate than they were during the first half."

Wholesale prices rose at a dizzying pace last winter and spring, at times increasing at an annual rate in excess of 13 per cent. Much of the sharp increase was related to the dislocations and crop damage caused by the cold weather and gas shortages in January and February.

Granum said the farm price decline - farm costs also fell in May - will lower supermarket prices "in the months ahead and this will bring welcome relief for consumer food budgets."

Wholesale prices are those that busi essmen charge each other, but they are precursors of prices that consumers eventually pay.

While the lower food prices will have the most immediate impact on consumer spending the continuing slowdown in the rate of price increase for industrial commodities is the most encouraging to economists.

Prices of industrial commodities such as motals, chemicals, lumber and textiles change much less frequently than do highly volatile farm prices.

The 0.3 per cent that industrial commodities rose in June was less than in May (0.4 per cent) or in April (0.6).

There has been a persistent winding down in the rate of price increases among industrial commodities, according to economist Robert Weintraub, staff director of the House subcommittee on domestic monetary policy.

While they are 7.2 per cent higher than a year ago, he noted they have been rising at an annual rate of 6.6 per cent for the past six months, and 5.3 per cent for the pase three moths, and roses at a compound annual rate of only 3.7 per cent in June.

Even fuel prices - such as coal, natuarl as and oil - which rose nearly 17 per cent in the last year, increased only 0.4 per cent last month. Fuel prices jumped 1.4 per cent in both April and May.

The wholesale price index stood at 194.5 per cent of its 1967 average in June, which means that a collection of goods taht cost $100 in 1967 cost $194.50 last month. WHile the index is not adjusted to account for seasonal variation, percentage changes are.

Whiel White House officials were pleased by the price decline. Granum said the increase in unemployment was "discouraging." HE said, however, that the administration does not think the increase involves "any fundamental chance in the economic outlook for the remainder of 1977."

Administration economists, and most private forecasters, think that the economy will grow more slowly than in the first six months of the year and that, as a result, joblessness will not decline as fast as it had.

Granum said the unemployment rate should decline to 6.75 per cent by year's end. Treasury Secretary Michael Blumenthal said Thursday he thought unemployment would be 6.5 per cent or lower by December.

The unemplopment rate is the percentage of the labor force - defined as those with jobs and those acatively seeking employment - that is unemployed. It is based on a monthly survey of 47,000 households.

Another survey, based on employer payrolls, showed an increase in employment of 135,000 people.

The unemployment rate for men fell from 5.3 to 5 per cent, while the unemployment rate for women rose from 6.6 to 7.2 per cent.

The black unemployment rate rose from 12.9 to 13.2 per cent, and the teenage unemployment rate rose from 17.9 to 18.6 per cent.